Can Gas Tax Be Deducted on an Itemized Deduction?
In general, if you deduct the cost of buying something for business purposes, you include the sales and similar taxes you paid on it in the deductible amount. Gasoline is no exception, though if it's fuel for a vehicle, you can generally choose to either deduct actual costs for operating the vehicle for a deductible purpose or a flat per-mile rate published by the Internal Revenue Service.
You can deduct vehicle expenses or mileage if you're self-employed or if you use a car for medical or charitable purposes. Prior to tax year 2018, you can also deduct mileage rates or expenses if you're driving a car to do work for an employer without compensation, provided you itemize, or if you're moving for a job.
Understanding Mileage Tax Deduction Rules
If you're driving a vehicle for a tax-deductible purpose, you can generally deduct either based on the number of miles driven at the published IRS rate, which is updated annually, or the actual expenses relating to your travel. The IRS rates for medical expenses, moving, charity work and business travel can all differ. If you use the mileage rate, you can't take a separate gas tax deduction, though you can separately deduct expenses for tolls and parking.
If you choose to claim vehicle expenses for business purposes, you can include costs like gas, oil and repairs, as well as fixed costs like insurance, registration and vehicle depreciation costs proportional to how much of the car's use is for business purposes.
For medical, charitable or moving deductions, you're only allowed to claim variable costs such as fuel and oil and not fixed costs such as maintenance, insurance, depreciation or vehicle registration. For that reason, the medical, charitable and moving mileage rates are generally lower than the business rates. Medical expenses generally include driving to receive medical care, and charitable driving includes transporting people or goods for a nonprofit.
It's a good idea to keep records of when and why you use your vehicle for a deductible purpose, as well as how many miles you drive and how much fuel and other consumables you use in the process. That way, when tax time comes, you can quickly figure out how much to deduct and which method to use.
Exceptions and Special Cases
If you use a car exclusively for business, you can simply deduct its entire cost of operation. Otherwise, you can generally use the mileage rate or the actual expense rate for its business use. If you don't choose the standard mileage rate for a vehicle used for business in the first year you use it for business, though, you won't be able to use that rate in the future. If you use it that first year, you can choose either method in subsequent years.
Additionally, if you operate five or more cars for business at the same time, you can't use the standard mileage rate, and if you claim depreciation deductions on your car, you may not be able to use the mileage rate depending on which depreciation methods and rules you follow.
2018 Tax Law Changes
Prior to tax year 2018, you're permitted to deduct unreimbursed employee expenses that exceed 2 percent of your adjusted gross income provided that you itemize your deductions. Those can include either actual vehicle expenses or mileage. Similarly, moving expenses are no longer tax deductible. As of tax year 2018, that option is no longer available, though the standard deduction is increasing so some taxpayers may still come out ahead.
Self-employed people are still able to deduct vehicle mileage or expenses using Schedule C of Form 1040. For 2018, the IRS mileage rates are 54.5 cents per mile for business purposes, 18 cents per mile for medical purposes and 14 cents per mile for charitable use.
The 2017 Tax Law
In 2017 and prior tax years, you're permitted to take what are called miscellaneous itemized deductions for certain expenses above 2 percent of your adjusted gross income. Those can include uncompensated work expenses, including the use of your vehicle.
The IRS mileage rate for 2017 for business use is 53.5 cents per mile. Medical and moving mileage is deductible at 17 cents per mile. Charitable vehicle use is deductible at 14 cents per mile.
- IRS: Publication 526 (2017), Charitable Contributions
- IRS: Publication 502 (2018), Medical and Dental Expenses
- eFile: Tax Deductible Car Miles - IRS Standard Mileage Rates Share
- SeriousGivers: Volunteers and Taxes
- IRS: Standard Mileage Rates for 2018 Up from Rates for 2017
- IRS: Topic Number 510 - Business Use of Car
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- The Motley Fool: These 9 Tax Deductions Are Going Away in 2018
Steven Melendez is an independent journalist with a background in technology and business. He has written for a variety of business publications including Fast Company, the Wall Street Journal, Innovation Leader and Ad Age. He was awarded the Knight Foundation scholarship to Northwestern University's Medill School of Journalism.